Big surpluses coming. And it's not just in the budget

As Treasurer Jim Chalmers puts the final touches to his second mid-year budget statement, Commonwealth Bank chief economist Stephen Halmarick predicts he will unveil a forecast for the 2023-24 budget to reach a surplus of $20 billion, a near-$34 billion turnaround from the outcome forecast in May.

Government figures show its finances in October were much healthier than had been expected, with revenue $8.4 billion greater than forecast and expenditure $800 million lower.

It warned that "care needs to be taken" in comparing actual and projected outcomes given monthly volatility in the flow of revenue and expenditure.

But Mr Halmarick said the improvement was being driven primarily by a combination of high prices for Australia's commodity exports and strong population growth from the big influx of migrants.

He said these factors, together with a $891 million boost to interest income, meant nominal gross domestic product was set to grow by 3.8 per cent this financial year, far higher than the 1.25 per cent growth forecast in the budget.

The CommBank economist said the government had based its outlook on the assumption that the iron ore spot price would drop from an average $US117 a tonne to $US60, whereas the current price is close to $US125 a tonne and he forecasts it will average $US95 a tonne.

"We [also] expect MYEFO [the mid-year economic and fiscal outlook] to significantly upgrade the net overseas migration estimates and, therefore, population growth," he said.

The government forecast net overseas migration to grow by 400,000 last financial year and 315,000 in 2023-24, but Mr Halmarick said it was "tracking closer to 500,000".

The economist said the stronger budget bottom line would help shrink net government debt from almost $575 billion to $541 billion, reducing its interest bill.

If the budget position improves as Mr Halmarick expects, the government is likely to come under increasing pressure to do more to assist families struggling with high living costs.

READ MORE:

As rising inflation and interest rates have bitten more deeply into household budgets, there have been persistent calls for greater government support.

Dr Chalmers has hinted that more help may be provided when the mid-year budget update is delivered before Christmas.

But the Treasurer has flagged there will not be major handouts because of concerns they would undermine central bank efforts to slow inflation.

Instead, Dr Chalmers has indicated the government would continue with its policy of banking most of any revenue upgrades.

A spokesperson for the treasurer declined to comment on Mr Halmarick's budget forecasts.